AIAPractice

Keeping Tabs

Tracking firm finances can be a full–time job, but it doesn’t have to be.

It has been said that small businesses are the backbone of the nation’s economy, and that’s no different for the architecture industry. In 2008, 141,200 people across the U.S. were employed as architects, with most jobs found at small architecture firms, according to the U.S. Bureau of Labor Statistics. Roughly 21 percent of those architects were self-employed, almost three times as high as all other occupations.

While a significant number of small architecture firms are making a go of it, the reality is that those same architects go about their business day-to-day without the resources of much larger firms, especially when it comes to maintaining their financial health. It’s a void that principals of small firms can’t ignore. That’s why vigilance may be the best strategy for successfully managing a business in a tough and increasingly competitive economy.

Tom Lenchek, AIA, principal of Balance Architects in Seattle says that the financial health of his seven-person firm relies on his ability to effectively allocate staff time to “the tasks that need to be done,” while delegating responsibilities for billing, time-keeping, project tracking, and all of the other financial must-dos.

“The big challenge is to get all that stuff done, but then also still have some time to do at least some architecture, so I just don’t end up being a manager,” Lenchek says.

Belmont Freeman, FAIA, of Belmont Freeman Architects, a New York City–based firm also with a staff of seven, prefers, as Lenchek does, to delegate some of the firm’s financial management to individual project architects. Freeman works particularly closely with his senior associate architect, who, he says, “has more business sense that I do.”

“It’s good to have an associate in the office with whom I can discuss the finances of different projects, how to staff them, and how to push them forward,” Freeman says.

Without the help of a full-time accountant, director of finance, or business manager on staff, principals such as Lenchek and Freeman have instead created processes that allow them to continually examine, on a regular basis, financial-performance measures including payroll, gross billings per month, gross income, and net income.

“I track a few key indicators that give me an indication of where we’re heading, how we did last month, where we are probably headed next month, and I just track those every month,” Lenchek says. “Over a number of years, I can get a feel for where things are at.”

Another resource that Freeman turns to for help is an outside business-management consultant, who comes in once a month to review how the firm is doing. Like Lenchek, he has learned how important it is to monitor closely the financial health of different projects and the history of the firm overall. “I was taught very early on by this consultant that the numbers you don’t quantify and look at regularly are never going to improve,” Freeman says.

Leaders of small firms should also take advantage of the everyday resources available to them, the way that Steven Fichtel, AIA, a sole practitioner in Minneapolis, does. “I try to look at business publications—magazines and newspaper articles that have to do with business in general—and always think about how this applies to my small architectural practice,” he says.

Fichtel is also active in his state AIA’s Small Firms Practice Committee, which he looks to as a source of support and face-to-face exchanges. The national AIA has a similarly organized Small Firm Round Table, and there are comparable groups at AIA chapters nationwide. Fichtel, who serves as committee co-chair, says that his group meets once a month to discuss a range of design and business topics unique to small architecture firms.

“Being involved in these committees and the AIA has given me some discipline, and [has] given me some structure,” Fichtel says. “In other words, I’ve been more mindful of what I’ve been doing with my business, and what some of the issues are that I need to continue to pay attention to.”